Australian Property

Viewing posts in the Australian Property category

Why rental growth just keeps on falling

ScreenHunter_19 Mar. 06 16.12 By Leith van Onselen The June quarter consumer price index (CPI) data, released today by the Australian Bureau of Statistics (ABS), revealed a continued moderation of rental growth at the national capital city level. According to the ABS, rents nationally grew by 0.6% over the June quarter of 2014 – down slightly on the 0.7% growth recorded in March – but moderated to 2.4% growth in the year to June – the lowest annual growth recorded since December 2005 (see below charts). The outlook for rental growth is weakening. While population growth is still running strong - which...
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Are banks slashing mortgage rates out of cycle?

adfa From the AFR: The Commonwealth Bank has slashed its five-year fixed mortgage rate to a record low of 4.99 per cent, offering borrowers the chance to exploit historically low interest rates. The country’s biggest lender said on Wednesday its five-year rate would fall 0.7 percentage points to 4.99 per cent, the lowest rate in the market. It is the first time the bank has cut its five-year fixed rate below 5 per cent. ...Fixed rates are influenced by the outlook for the cash rate...ANZ Bank interest rate strategist Zoe HcHugh said markets were pricing in a 50 per cent chance of a quarter-point...
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SMSF leveraged property in the spot light

ScreenHunter_12 Sep. 23 12.54 By Leith van Onselen The draft report of the Murray Inquiry into Australia's financial system, released last week, took direct aim at self-managed super funds (SMSFs) and leverage, warning that they could pose risks to the financial system and retirement savings: The use of leverage in superannuation funds to finance asset purchases is embryonic but growing. The proportion of SMSFs with borrowings increased from 1.1 per cent in 2008 to 3.7 per cent in 2012. The average amount borrowed increased over this period from $122,000 to $357,000. Total borrowings in 2012 were over $6.2 billion. More...
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Joye: Australian housing bubble is now

ScreenHunter_3365 Jul. 20 08.17 By Leith van Onselen The AFR's Chris Joye posted a great article over the weekend explaining why he believes that Australian housing is now a bubble since values are between 20% and 30% above fair value: Australian homes are 19 per cent overvalued... if you compare the house price-to-income ratio to its average since 1993. Other credible benchmarks on which to base future house price appreciation – including household income growth, the returns consumers think they will get and the rate at which rents rise – similarly imply that housing is overvalued by between 20 per cent and...
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RP Data weekend property market update (members)

ScreenHunter_18 Mar. 18 17.58 Click to view RP Data’s latest weekly housing market update, which provides a useful snapshot of the housing market as at 20 July 2014. This week’s report includes: Latest weekly dwelling value results; Auction results & clearance rates; Latest median house & unit prices; Average time on market & vendor discounts; Mortgage market activity; and New listings...
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Auction clearances record broad-based rise

ScreenHunter_19 Mar. 13 13.12 By Leith van Onselen The national auction clearance rate rose over the weekend, with Sydney, Melbourne and Brisbane all recording increases. According to RP Data, the national weighted average preliminary auction clearance rate was 70.7% over the weekend, which was up 2.0% from the 68.7% preliminary clearance rate reported last weekend. Sydney’s clearance rate rose by 0.5% to 76.9%, whereas Melbourne’s rose to 69.6% (last weekend 67.0%). Brisbane, which typically only has a small number of auctions, experienced a sharp rise in its clearance rate to 54.1% from 47.0% the weekend before....
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Housing loan-to-income by state

LTIAllStates Cross-posted from Martin North's DFA blog: Some time back we reported on the results of our household surveys, looking especially at the loan to income (LTI) data. This was prompted by the Bank of England’s move to limit banks abilities there to lend higher LTI loans. At the time we showed that at an aggregate level, LTI’s in Australia were higher than in the UK, yet despite this, there was no evidence of any local move to curb higher LTI borrowings, other than vague warnings from the regulators more recently. There is little relevant data published by the regulators on this important...
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Weekly RP Data Australian house price update (members)

ScreenHunter_15 Mar. 05 15.42 By Leith van Onselen In the week ended 17 July 2014, the RP Data-Rismark 5-city daily dwelling price index, which covers the five major capital city markets, rose by 0.39%. It was the fifth consecutive week of rises (see next chart). The growth nationally was driven by a strong rise in Melbourne (see next chart). Values are now up 1.62% in July, driven by massive gains in Melbourne and strong gains in Sydney (see next chart). Values are up by 5.05% so far in 2014, with all major capitals except for Perth experiencing growth, and particularly strong gains recorded in Sydney...
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Review: Australia’s Bubble Economics

Screen Shot 2014-07-17 at 10.03.25 am Paul Egan and Philip Soos [1] have a new book out. It available for free here (pdf), and it’s called Bubble Economics: Australian Land Speculation 1830-2013. Some reviews and reactions have started to flow in - locally, internationally, and even some critical reactions. This post gives my take on this very detailed and topical book. A short review would go something like this: Read this book if you want a very rich long term view of Australia’s economic history, particularly regarding land use and land cycles, mining booms, taxation, banking and finance. Think of it as a reference book that...
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Supply-side squeeze forces record lot prices

ScreenHunter_18 Jul. 05 10.22 By Leith van Onselen The Housing Industry Association (HIA) has released its latest Residential Land Report, which reveals that median vacant lot price across Australia hit a record $205,248 as at March 2014 after rising by 2.0% over the quarter (see next chart). Residential lot sales also continue to trend lower, with the number of sales declining 4.7% in the year to March 2014. According to the HIA, supply-side bottlenecks are once again starting to bite, brought about by the usual culprits: inadequate land release, cumbersome planning approval processes, and excessive taxes and...
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What’s behind Australia’s apartment shift?

ScreenHunter_3341 Jul. 17 08.02 By Leith van Onselen Yesterday's dwelling commencements data for the March quarter, released by the the Australian Bureau of Statistics (ABS), revealed an ongoing boom in unit & apartment construction, which hit its highest ever level on a rolling annual basis (see next chart). Breaking down the data, you can see that units & apartments accounted for a record 42.3% of total dwelling commencements in the year to March 2014, up from around 30% in the years leading up to the Global Financial Crisis (see next chart). At the state and territory level, apartment construction...
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“Mad” Adam leaps to negative gearing’s defence

ScreenHunter_3327 Jul. 16 11.18 By Leith van Onselen Wow. The Murray Inquiry seems to have slipped something into the water. Following the HIA's shallow defence of negative gearing, Business Spectator's Adam Carr has chimed in with more gruel: Home lending figures already show first home buyer activity at its lowest on record. If that trend continues, then it’s likely Australia will follow other major advanced economies with already have low or declining rates of home ownership... It’s against that backdrop that any punitive measures taken against investors, including regular calls to scrap tax breaks such as...
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Dr Wilson: Houses will forever outpace incomes

levitation By Leith van Onselen Fairfax's resident property spruiker, Australian Property Monitor's (APM) Dr Andrew Wilson, has swiftly played-down the RBA's housing valuation report (summarised here), which warned that renting would be a better option than buying if real house prices were to grow below their long-run average of 2.4% per annum: Domain Group senior economist Andrew Wilson said there was no evidence to suggest that house prices were not going to maintain their long-term average. ''We're going to have to have some significant long-term deterioration in the value of housing in this country...
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Aussie property is not a China hedge

no hege The AFR has a little profile today of a guy selling Aussie property to wealthy Chinese: Australian permanent residency has become a new status symbol for wealthy Chinese and is driving a boon in advisory services for Australian accountants, particularly since Canada closed its significant investor visa scheme a few months ago. Wealthy Chinese are pouring substantial sums, from $5 million to $50 million, into Australian real estate to guard against potential shocks to the Chinese economy. ...“That diversification piece is a big driver; they want a safe haven for part of their wealth,”...
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Rental slowdown as vacancies surge (members)

ScreenHunter_07 Jul. 17 21.09 By Leith van Onselen SQM Research has released its rental vacancies report for June, which reveals weakening rental market conditions across Australia, as evident by rising vacancies and quarterly falls in asking rents. The national rental vacancy rate rose to 2.3% in June, with five of eight capitals recording annual increases (see below table). The mining state capitals of Perth (+0.9% to 2.5%), Brisbane (+0.4% to 2.4%) and Darwin (+0.8% to 1.6%) have each recorded big annual rises in rental vacancies, reflecting slowing economic conditions. "With gradual increases continuing to...
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HIA leaps to the defence of negative gearing

ScreenHunter_01 Jun. 28 09.52 By Leith van Onselen Right on cue, the property lobby has rallied to the defence of Australia's negative gearing regime, slamming the Murray Inquiry into Australia's financial system's Interim Report for claiming that negative gearing "encourages leveraged and speculative investment in housing" and recommending that the Abbott Government's upcoming Tax White Paper examine its efficacy (see here for details). According to The AFR, Housing Industry Association (HIA) chief economist, Harley Dale, has hit back at the Inquiry stating that: ...singling out negative gearing and its role in...
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Murray Inquiry targets negative gearing, housing debt (members)

ScreenHunter_12 Sep. 23 12.54 By Leith van Onselen While the Murray Inquiry' Interim Report into the financial system has dropped the ball on banking sector regulation and support, as explained in great detail by Houses & Holes, it does at least make some sensible observations on Australia's superannuation system (outlined here) and housing-related tax policy. On tax policy, the Interim Report explicitly highlights that the combination of high tax rates on savings, as well as tax generous concessions like negative gearing and capital gains tax discounts, has made investment into housing a relatively attractive...
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Changing social norms behind housing shortage?

ScreenHunter_3156 Jul. 07 07.45 By Leith van Onselen Business Spectator's Robb Burgess has posted an interesting article tackling some of the reasons behind the undersupply of Australian housing: ...why we have become accustomed to the phrase ‘housing shortage’ and why affordability of homes is so low today compared to when house prices really started to take off in the mid-1990s. The answer lies not in the ratio of the number of dwellings to residents, but what kind of residents we’ve become – that is, residents who don’t want to live with each other as much as we once did. It is a complex picture, made up of...
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Pickering: Australian housing “severely overvalued”

ScreenHunter_3304 Jul. 15 10.21 By Leith van Onselen Business Spectator's Callam Pickering has produced an interesting assessment of the RBA's new research paper, which attempts to determine whether Australian homes are overvalued versus renting. Like my analysis posted earlier, Pickering also concludes that Australian housing is significantly overvalued given the likely prospects for incomes and capital growth; although how he arrives at his conclusion is a little different: My general view is that Australians are frequently ripped off when purchasing a home. A combination of poor housing policy... combined with housing...
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No RBA, Australian housing is not “fairly valued” (members)

ScreenHunter_3297 Jul. 15 06.45 By Leith van Onselen The Reserve Bank of Australia has released a new wonkish report which attempts to determine whether Australia's housing market is fairly valued compared with renting, based on a comparison of the financial cost of renting a home versus the cost of owning a similar dwelling, whereby the latter depends on the purchase price, real mortgage rates, repairs, council rates, transaction costs, and expected price appreciation. The RBA basically concludes that Australian housing is more or less currently "fairly valued" if house prices continue to grow at the average rate...
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Sell Sydney property

imgres Are you enjoying this ride in Sydney property and thinking it can go on forever with the RBA snookered by a high dollar? Then a word of warning. The RBA is alarmed and telling you to cool it and it has now endorsed macroprudential tools to slow you down without raising interest rates. Similar tools have already sent house prices into reverse in New Zealand. These things move with the pace a glacier but they do move. Could it go higher? Yep. But if you think you can ride this moon rocket right to the top and get out in time you may find the exit is jammed with like-minded...
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Sydney housing speculation reaches the absurd (members)

ScreenHunter_11 May. 06 12.08 By Leith van Onselen Just when you thought the speculator frenzy that has engulfed Sydney’s housing market couldn’t get any more crazy, today’s Lending Finance data for May, released by the ABS, has once again smashed all records, with both the value and proportion of mortgages going to New South Wales investors surging to another all time high. As shown below, the value of investor loans in New South Wales (read Sydney) continues to rocket, with Melbourne – the second hottest market – also experiencing strong growth: According to the ABS, investor finance commitments in New...
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Auction clearances record broad-based falls

ScreenHunter_19 Mar. 13 13.12 By Leith van Onselen The national auction clearance rate dipped over the weekend, with Sydney, Melbourne and Brisbane all recording falls. According to RP Data, the national weighted average preliminary auction clearance rate was 68.7% over the weekend, which was down slightly from 69.4% reported last weekend. Sydney’s clearance rate fell by 0.2% to 76.4%, whereas Melbourne’s fell to 67.0% (last weekend 68.4%). Brisbane, which typically only has a small number of auctions, experienced a sharp restracement in its clearance rate to 47.0% from 59.3% the weekend before. However, overall...
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RP Data weekend property market update

ScreenHunter_18 Mar. 18 17.58 Click to view RP Data’s latest weekly housing market update, which provides a useful snapshot of the housing market as at 13 July 2014. This week’s report includes: Latest weekly dwelling value results; Auction results & clearance rates; Latest median house & unit prices; Average time on market & vendor discounts; Mortgage market activity; and New listings...
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Housing sector to stall

Transact12MonthsDFAJun14 Cross-posted from Martin North's DFAblog. Reflecting on the ABS data released today, and already covered here, and putting that into context of our household surveys, we think momentum is changing and the housing sector could stall in coming months. Demand for new finance fell 0.8% in May. Whilst refinancing remains quite buoyant, thanks to low rates, investors appear to be slowing, as already foreshadowed in our surveys. First time buyers are still at low levels, And they are still priced out of the market. The current low interest rates and rising prices have together...
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